Today is April 15, and I hope you've paid your taxes. If you have, you should feel a delightful sense of civic pride and patriotism. Meanwhile, we can expect plenty of wailing and gnashing of teeth from those who reject the idea of public goods and are filled with self-pity because they take part in a progressive tax system where the wealthy still maintain huge advantages over the poor. Across the pond, Kevin Drum finds a better example in a must read piece by author J.K. Rowling, tax hero.
One term that you should become familiar with today is "tax expenditure." While we typically call them loopholes or breaks or credits, tax expenditures are when we use the tax code to create incentives; giving someone a tax credit is no different, functionally, than giving them cash. Some examples include the mortgage tax credit and tax credits we give companies for taking their operations overseas; the latter of which is why several big companies, including oil giant Exxon, won't pay any taxes this year. Big corporations are less likely to be audited, as well.
Closing these loopholes would be a wise idea -- the administration has proposed doing so -- but as we've discussed before, the overwhelming majority of Republicans who have signed the Grover Norquist pledge have, in addition to promising not to raise taxes, also promised not to close tax loopholes unless the income tax goes down. This makes it hard to cut this kind of spending.
"A lot of these things are just subsidies to these companies, particularly on the corporate side," Michael Ettlinger, a budget expert at the Center for American Progress, says. "They just happen to be administered by the tax code and have nothing to do with some rational measure of determining tax liabilities."
These subsidies don't seem to get conservatives very worked up, certainly not so worked up as the false idea that nearly half of Americans don't pay taxes. I'm looking for spending hawks who are ready to go after all kinds of waste, including tax expenditures, so we can cut the deficit and start broadening the tax base and experimenting with consumption taxes.That's the route to a fairer tax code, and happier tax day, for all of us.
-- Tim Fernholz
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